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Stocks Hitting New Highs
The S&P 500 remains 11% off its early May high and the concerns on the eurozone still loom, but that has not stopped a handful of stocks from hitting new all-time highs. The list is not large but is starting to grow by the day as investors push stocks out of bear market territory. (For more, read Surviving Bear Country.)
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The list of new highs hit 53 for the three major indices on Wednesday, well off the level it hits during a robust bull market. However, that's not too bad considering the negative sentiment hanging over the market.
There are four companies that are hitting highs that appear to have more room to run on the upside. The key is entering the position on a pullback when one occurs.
The first name is the off-price retail chain Ross Stores (NYSE:ROST). As of January the company operated 1,055 stores that offer clothing and home accessories for 20-70% off retail prices. The stock is up 35% in 2011 and broke to a new all-time high last week. Fundamentally the stock is not yet over priced with a forward P/E ratio of 13.9 and a PEG ratio of 1.23. Add in the business model of offering merchandise at discount prices during a rough economic environment and ROST appears to be headed for higher prices.
In a related sector is Deckers Outdoors (Nasdaq:DECK), the maker of UGG boots and Teva sandals. The stock has historically been strong heading into the retail season as consumers clamor to get a hold of the company's trademark sheepskin boots. The boots are typically a top ten selling product during the holiday season and there is no reason to believe it will not continue in 2011. Fundamentally the stock is undervalued with a PEG ratio of 0.96 and forward P/E ratio of 17.08. The stock is up 25% in 2011 and waiting for a pullback to the low $100s before considering a buy is a good strategy. (To learn more, check out Analyzing Retail Stocks.)
An old school technology company hitting a new all-time high is not something you hear every day. But International Business Machines (NYSE:IBM) has been able to buck the trend and break to a new historic level. The diverse IT and computer company trades as a good value play with better growth prospects than many of its large-cap competitors. The forward P/E is 12.02 and PEG ratio is 1.18. The stock also pays a 1.6% dividend. After a 20.9% rally in 2011, investors should look for pockets of weakness to begin building a position in IBM.
A company that offers products that make total sense in this current environment is Tyler Technologies (NYSE:TYL). The firm offers software solutions and services to make it easier for local governments and schools to manage their daily functions. With many municipalities in financial trouble, the services offered by TYL could be a great help to improving their bottom line. The company has a higher valuation then the first three stocks with a PEG ratio of 2.14, however due to the niche market it could easily demand a higher valuation. The 35% gain year-to-date has been impressive, but there is a good chance of higher returns in the months ahead.
The Bottom Line
As great as it feels to look at stocks hitting new highs, if you do not own them yet, today is not the day to buy. All stocks have pullbacks even during the strongest of bull markets. The key is to look for relative strength in stocks hitting highs and use any pullback to support as an opportunity to build a new position. (To invest on pullbacks, see Why A Falling Stock Is Not Always A Bargain.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.
The list of new highs hit 53 for the three major indices on Wednesday, well off the level it hits during a robust bull market. However, that's not too bad considering the negative sentiment hanging over the market.
There are four companies that are hitting highs that appear to have more room to run on the upside. The key is entering the position on a pullback when one occurs.
The first name is the off-price retail chain Ross Stores (NYSE:ROST). As of January the company operated 1,055 stores that offer clothing and home accessories for 20-70% off retail prices. The stock is up 35% in 2011 and broke to a new all-time high last week. Fundamentally the stock is not yet over priced with a forward P/E ratio of 13.9 and a PEG ratio of 1.23. Add in the business model of offering merchandise at discount prices during a rough economic environment and ROST appears to be headed for higher prices.
An old school technology company hitting a new all-time high is not something you hear every day. But International Business Machines (NYSE:IBM) has been able to buck the trend and break to a new historic level. The diverse IT and computer company trades as a good value play with better growth prospects than many of its large-cap competitors. The forward P/E is 12.02 and PEG ratio is 1.18. The stock also pays a 1.6% dividend. After a 20.9% rally in 2011, investors should look for pockets of weakness to begin building a position in IBM.
A company that offers products that make total sense in this current environment is Tyler Technologies (NYSE:TYL). The firm offers software solutions and services to make it easier for local governments and schools to manage their daily functions. With many municipalities in financial trouble, the services offered by TYL could be a great help to improving their bottom line. The company has a higher valuation then the first three stocks with a PEG ratio of 2.14, however due to the niche market it could easily demand a higher valuation. The 35% gain year-to-date has been impressive, but there is a good chance of higher returns in the months ahead.
The Bottom Line
As great as it feels to look at stocks hitting new highs, if you do not own them yet, today is not the day to buy. All stocks have pullbacks even during the strongest of bull markets. The key is to look for relative strength in stocks hitting highs and use any pullback to support as an opportunity to build a new position. (To invest on pullbacks, see Why A Falling Stock Is Not Always A Bargain.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Matthew McCall
Matthew McCall is the president of Penn Financial Group, LLC, a registered investment advisor. He also publishes two newsletters, The ETF Bulletin and The PFG Letter as well as other educational material. As a registered investment advisor, he manages clients' investments based on their specific goals and objectives.
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